Ego Depletion and Evidence Integration while Auditing Complex Estimates.

• In Event: Factors affecting auditor judgment II

Abstract

Auditors face significant difficulties integrating audit evidence, which is a critical component of effectively auditing complex accounting estimates. The cognitive complexity involved in integrating evidence likely contributes to these difficulties. Further, auditors are often susceptible to ego depletion – a reduced ability or willingness to use self-control to effectively regulate decision-making – that can impede performance on cognitively complex tasks. In an experiment involving professional auditors, we examine whether a decision aid designed to reduce cognitive complexity helps auditors process evidence in a way that improves their judgments and decisions about complex estimates. We find that our decision aid causes depleted auditors to appropriately refine more assumptions within a client’s discounted cash flow (DCF) model. As auditors appropriately refine more assumptions, they increase their likelihood of integrating evidence; evidence integration leads to lower reasonableness assessments regarding a biased estimate and increases urgency in auditors’ follow-up actions taken in response to the estimate. Our study contributes to our understanding of the processes used in auditing complex estimates, how auditors integrate specialists’ evidence, and how decision aids can enhance the performance of depleted auditors.

Authors

• Emily Elaine Griffith, University of Wisconsin-Madison

• Jacqueline S Hammersley, University of Georgia

• Patrick J Hurley, Northeastern University